Bull Markets Make Fortunes, Bear Markets Bring Liquidations

People who lived through the extraordinary house-price rises of 2020 and 2021 could be forgiven for thinking those years were unique. But stretch the timeline back and New Zealand property has always had a strong cyclical rhythm.

The previous great boom ran through much of 2000 to 2007. The Reserve Bank of New Zealand later noted that house prices more than doubled over that period, while household debt relative to disposable income climbed from roughly 100% to around 150%.

The mechanism was straightforward. Rising house prices encouraged people to borrow more. Rising collateral values made lenders more comfortable extending credit. More money entered property, which supported prices further.

At first, people push the snowball. After a while, the snowball seems to roll by itself.

Around 2007, the direction changed. Over the following years a wave of New Zealand finance companies collapsed. The Financial Markets Authority records that between 2006 and 2012, 51 finance companies went into liquidation or receivership, or froze payments to investors.

Hanover Finance became one of the best-known names from that period. It was not a bank. It was a finance company, and a significant portion of its lending was exposed to higher-risk property development. As property conditions deteriorated and projects struggled to repay on schedule, Hanover itself ran into trouble. The FMA later recorded liabilities of about NZ$554 million to roughly 36,500 investors.

The money had travelled in a simple direction: investors put money into finance companies; finance companies lent to developers; developers bought land and built houses. When the houses sold, developers repaid the loans, finance companies earned interest, and investors received returns.

While prices were rising, the chain looked elegant. Once property stopped selling quickly enough, money travelled back through the same chain in reverse. Developers could not repay, finance companies came under pressure, and eventually even the people who had provided the original capital were caught in the problem.

Auckland had another instructive case from the same cycle.

Winsun Developments, associated with developer Lily Zhong, developed the 153-apartment Winsun Heights project on Vincent Street in central Auckland. Contemporary reporting said 61 apartments had sold while 92 remained with the developer, and that Winsun owed Hanover Finance about NZ$9 million. Hanover later moved to sell the remaining apartments to recover its lending. Lily Zhong was subsequently adjudicated bankrupt.

The buildings existed.

The problem was whether they could be sold at the price and speed assumed when the project was financed.

An owner-occupier whose home falls 15% in value can say: “Fine. I won’t sell. I’ll live here for a few more years.”

A developer usually does not have that freedom. Loans mature. Contractors need paying. Wages still go out on Friday. Interest does not pause because the market has had a bad year.

No bank pats you on the shoulder and says:

“Tough market, mate. Pay us next year.”

Banks do not work like that.

When I later read the old Winsun story again, I found myself thinking about Charlie.

What was happening to the houses he had finished but had not yet sold?

Why does property development become so addictive? A simple example helps.

Suppose Charlie has a site that can produce 10 townhouses, each expected to sell for NZ$1 million. Total sales would be NZ$10 million.

But NZ$10 million is not profit.

Suppose the land costs NZ$3 million. Construction, design, consenting and infrastructure cost another NZ$5 million. Finance and other costs add NZ$500,000. Total cost: about NZ$8.5 million.

If everything goes to plan, Charlie makes NZ$1.5 million.

Now let house prices rise 10%.

Each townhouse sells for NZ$1.1 million. Total sales rise from NZ$10 million to NZ$11 million. Yet the land and most construction costs do not suddenly rise by another million dollars just because the finished homes are worth more.

Profit rises from NZ$1.5 million to NZ$2.5 million.

House prices rose only 10%. Development profit rose by roughly two-thirds.

The same maths works in reverse. If each house sells for NZ$900,000, total revenue falls to NZ$9 million while total project cost remains around NZ$8.5 million. The original NZ$1.5 million profit is now only NZ$500,000. A little more price weakness, a little cost overrun, a little more interest, or an extra six months before settlement, and a project that once looked highly profitable can slip into loss.

But during those years Charlie mostly saw the first half of that equation. Project after project worked.

At first people said: “Charlie is pretty capable.”

Later: “Charlie really knows property.”

People who owned land but did not know how to develop it started asking him:

“Charlie, have a look at this site for me. Can it work?”

People who had projects but lacked construction experience asked him to take them on.

There are many ways to argue over whether someone is genuinely good at business. But when projects keep finishing and the money keeps coming back, the results become their own argument.

Charlie kept making money.

Everyone could see it.

Charlie did not stop making mistakes.

On one site he admitted over drinks: “I bought this one too high.”

Then the market rose while the project was under way.

He still made money.

Another project ran over budget. Charlie complained over dinner: “There’s hardly any profit in this one.”

When the final accounts were done, it had still made more than he used to earn simply building for other people.

Another project ran months late and carried extra interest. We worried for him. Then prices rose again, the houses sold, and once again it worked out.

His language changed slowly.

At first: “I got lucky this time.”

Later: “I know this area pretty well.”

Later still: “You guys are too conservative.”

One night he showed us a new site on his phone. It was larger than anything he had done before.

Someone said: “Charlie, isn’t this one a bit big?”

He smiled.

“You said I was taking a big risk when I built two.”

When you put it that way, he had a point.

Earlier, people mostly listened when Charlie talked business. Then they started asking: “Can you still buy in this area?” “Would you develop here now?” “When are you buying the next site?”

Eventually someone asked a more direct question:

“Wang Ge, take me with you on the next one.”

At some point, people had stopped calling him simply Charlie.

Around the table, more and more people called him Wang Ge — Brother Wang.

If you had a project, you wanted Wang Ge to build it. If you had land, you wanted Wang Ge’s opinion. If you had no project but had some spare money, you started asking whether you could put a little into the next deal.

Wang Ge was moving forward.

People around him began moving forward with him.

One evening over drinks, Wang Ge mentioned a project where the bank facility had come up short. Work had already started, and stopping would have been expensive, so he had borrowed money elsewhere.

I asked: “What interest rate?”

“Eighteen.”

I thought I had misheard him.

“Eighteen thousand?”

“Eighteen percent.”

Several people at the table stared at him.

Someone said: “Are you mad?”

Wang Ge did not seem particularly bothered. He ran through the numbers for us. If the houses sold at the expected price, borrowing that money for six months would be expensive, but the project would still make a profit. Stopping could cost more.

We still thought the money was absurdly expensive.

Six months later, the project was finished. The houses sold. The debt was repaid.

The next time we saw Wang Ge, he was driving a new Porsche.

We joked about the 18% loan again.

He laughed.

“See? I’m still alive.”

Later, another project came up short of cash.

This time nobody told him he was mad.

One friend even asked:

“Wang Ge, how much are you short? I could lend you some.”

Others who did not have projects of their own simply gave money to Wang Ge, hoping to join him on the next one.

New Zealand has long had an active non-bank lending market alongside the registered banks. Reserve Bank data showed non-bank lending institutions had loans of around NZ$23 billion in March 2024, up from about NZ$20 billion in 2022 and NZ$16 billion in 2020.

In a rising market, expensive money can still fit inside the spreadsheet. Finish the project, sell the houses, repay the lender — and 18% becomes one very expensive line item in a profitable deal.

Wang Ge had already crossed that bridge more than once.

So when another funding gap appeared, he often said the same thing:

“It’s fine. I’ll move some money around and get through it.”

For a long time, he was right.

How hot was New Zealand construction around 2021?

In the year to March 2022, 50,858 new homes were consented nationwide, up 24% from the previous year and a record at the time.

If you lived in Auckland, you did not need Statistics New Zealand to tell you the market was busy. One old house disappeared and six townhouses appeared. Around the next corner another site was being turned into eight. Carpenters were busy. Plumbers were busy. Electricians were busy. Project managers were being fought over.

For construction firms, expansion looked entirely rational. If 20 people were not enough, hire 40. If you needed more vehicles, buy them. If the office was too small, move. Add project managers, estimators, administrators.

Each decision made sense on its own.

The problem was simple: projects can fall by half far faster than a company can shrink by half.

By late 2021, the direction was changing.

At first, nothing looked particularly dramatic.

Houses simply took longer to sell.

Ten homes that once might have sold within six months could now leave three or four settled and the rest still sitting there. The houses had not vanished. The cash simply had not arrived.

At the same time, lenders reassessed valuations. Land previously valued at NZ$5 million might now be valued at NZ$4.2 million. A bank that had once been prepared to lend NZ$3.5 million might now offer NZ$2.8 million.

For an ordinary homeowner, a lower valuation can feel like a loss on paper. For a developer, it can suddenly become a funding hole of hundreds of thousands — sometimes millions — while wages, GST, suppliers and interest keep moving on schedule.

Wang Ge had always believed there was another way through a tight patch. Similar problems had worked themselves out before.

Then one evening, after we had not seen him for quite a while, someone asked:

“How’s business?”

He said:

“It’s okay. Money just moves a bit slowly now.”

He said it lightly.

In development, “money moves slowly” can mean many things. Discount a house and sell it. Put in more of your own money. Refinance. Delay a supplier. Move cash from another project.

As long as there is another plank to grab, the company does not sink immediately.

That is why businesses rarely fail like light bulbs. The market turns and they do not go “pop” the next day. They struggle for a long time.

If a group contains several companies, the situation becomes more complicated. Company A needs cash, so Company B lends it some. B expects to be repaid when Project C settles. In a good market, the owner may think: “They’re all my companies anyway.”

In a bad market, limited companies stop looking like separate wallets and start looking more like boats tied together. When one begins taking on water, financial links can carry the pressure into the others.

That is what makes Diamond worth returning to.

Diamond Homes was incorporated in 2017. D&L Development appeared in 2021. Diamond Construction followed in 2023. Those dates do not prove that any particular commercial decision was wrong, and they do not establish wrongdoing. But they do offer a useful window into a construction-based business group that lived through the shift from a booming property and building market into a weaker one.

The questions worth watching are not limited to “how much does the company owe?” They include how money moved between construction and development activities, how much was due between related companies, how much of those receivables can actually be realised, when land projects began to come under pressure, and at what stage debt accumulated.

Those questions belong to the liquidators and the public documents that will follow.

There is no value in writing the ending before the evidence exists.

But once a company enters liquidation, the numbers in its accounts face a different test.

The value written beside a piece of land is not necessarily what that land will fetch when it must be sold. A receivable from a related company may be recorded as an asset, but that does not mean the money can actually be collected in full. Once assets are converted into cash, different creditors also occupy different legal positions.

Eventually, many neat accounting numbers collapse into one much simpler question:

How much cash can actually be recovered?

That is what future Diamond liquidation reports will help reveal — how the numbers on paper become real-world recoveries.

And the liquidation date itself is rarely the date the trouble began.

A company with cash can keep filling gaps. A shareholder can inject more money. Supplier terms can drift from 30 days to 60 or 90. If a bank will not lend, other financing may still exist. If another company in the group has cash, money may move internally.

As long as another plank remains within reach, a business can keep floating.

That helps explain why the property market may turn years before business failures finish working their way through the construction sector. Deloitte reported 747 formal insolvency appointments in New Zealand construction during 2025, representing about 24% of all company failures and an increase of 14% year on year. But it would be wrong to treat all 747 as builders who became leveraged developers and blew up. Fixed-price contracts, labour and material costs, bad debts, weak demand, cash-flow pressure and gaps between projects can all bring down a construction business.

Diamond’s story is not finished.

So we will stop there.

Charlie used to be at most gatherings. Usually he was the most talkative person at the table. Projects. The market. Business plans. Which piece of land was worth buying. How large the business might be next year.

Then, at some point, we started seeing him less often.

At first people asked: “Why is Wang Ge always so busy these days?”

Later, nobody seemed to ask.

When he did turn up, he was quieter. People talked property and he mostly listened. Someone would ask how things were going.

“Fine. Busy.”

His phone would ring. He would step outside to take the call.

When he came back, he did not always pick up the conversation where he had left it.

The table would go quiet for a moment.

Charlie might smile.

“Soon. A few projects are just finishing up.”

Then somebody changed the subject. Children. Travel. A new restaurant.

Nobody asked whether the Bentley looked better in blue or white.

The Charlie in this article is not one real, identifiable person. Some of the people whose experiences are reflected here sold their projects and moved on. Some simply went through a period of tight cash flow. Some are still doing well. Others may have endured very difficult years. We cannot diagnose someone’s business from the fact that he has become quieter at dinner.

But after watching several people travel through the same years, Diamond, Hanover, Winsun, house prices, interest rates, debt and liquidation numbers stop feeling entirely like numbers.

Friday used to be a night for dinner.

Later, Friday might also mean wages, suppliers and another GST payment.

By this point, I do not particularly want to tell you what Diamond means. How much its assets ultimately realise, how much creditors recover, and how related-company balances are treated should remain questions for the liquidators and the public record.

I still think about Charlie.

The Charlie who bought us coffee after finishing his first two houses.

The Charlie whose dinners became more elaborate as the projects grew.

The Charlie we called crazy for borrowing at 18%, who appeared six months later in a new Porsche.

The Charlie who once seriously asked whether a Bentley looked better in blue or white.

We see him less and less at gatherings now.

Next time everyone gets together, I do not know whether Charlie will be there.